The 10-year yield sets a 52-week high… a wedge pattern suggests a big move is coming… which way will it break?… a quick 140% winner from Jonathan Rose… Tom Yeung and Eric Fry and urging investors to avoid the hot AI trade
This morning, the 10-year Treasury yield hit a 52-week high – 4.6%.
That alone has important consequences for your portfolio, but there’s another angle on this that could be even more impactful.
First, to make sure we’re all on the same page, the 10-year Treasury yield is the most important number in the global economy. It sets the tone for borrowing costs – mortgages, business loans, and credit markets. It determines the discount rate investors use to value future earnings, meaning higher yields compress stock valuations. And it competes directly with stocks: when “risk-free” yields rise, money rotates out of equities.
Basically, when the 10-year moves, everything feels it.
This 52-week high comes as mounting inflationary pressures tied to the Iran war strengthen expectations for a Federal Reserve rate hike later this year.
But in the chart below, you’ll see a setup brewing that could be even more challenging for millions of portfolios.
What you’re looking at is the 10-year Treasury yield dating back to mid-2021. The trendlines reveal a textbook symmetrical triangle – a compression pattern in which higher lows and lower highs converge toward a decision point. History suggests that when these trendlines meet, a big move follows.
The question is “which direction?”
A significant breakout from here would open the door for a move to at least 18-year highs in yields just above 5% – potentially even higher if market confidence is truly shaken.
On the other hand, a break below the rising lower trendline – around 4.0% – would signal a return toward much lower yields, and with it, the rate-cut environment that much of the market was expecting at the start of this year.
Right now, the bond market is signaling an upside break.
What’s the case for each move?
Proponents of a yield breakout point toward the Federal Reserve’s dual mandate: keeping inflation under control while supporting employment.
Right now, they argue, inflation pressures tied to energy and the Iran conflict are reaccelerating faster than the labor market is weakening. In other words, rising inflation is strengthening the case for higher rates – or at least keeping rates elevated – while employment conditions still aren’t weak enough to justify cuts.
That’s why some economists now believe the Fed could find itself boxed in. Even if growth slows, persistent inflation may prevent policymakers from easing monetary policy anytime soon.
Here’s Moody’s Analytics chief economist Mark Zandi laying out the case last week:
I just don’t see how [new Fed Chair Kevin Warsh] is going to get any kind of support for cutting interest rates in the current environment.
If [inflation expectations continue] to move higher – and they are drifting higher – it’s going to be tough.
Not only will cutting rates be off the table, but even holding rates where they are is going to be pretty tough.
On the “break lower” side, let’s go to Treasury Secretary Scott Bessent. Speaking to CNBC last week, he said:
I firmly believe that nothing is more transient than a supply shock, and we can look through that, because before the Iranian conflict began, core inflation was coming down.
So, I think core inflation will continue coming down.
In strengthening his case, he added:
I was never on team transitory during Covid.
We’ll get to the other side of this, and I don’t know whether it’s a few days or a few weeks, and energy inflation will come back down.
The mention of “transitory” points us toward the crux of the issue
Will Iran-related inflation remain a temporary supply shock – or will it harden into the structural, embedded kind?
Zandi appears to be leaning toward embedded. Bessent continues to argue transitory, drawing a careful distinction between energy-shock inflation – which has a natural ceiling – and the demand-driven variety that proved so stubborn after Covid.
As we’ve covered in recent Digests, legendary investor Louis Navellier has been making the same argument as Bessent. His read: the market is misreading a temporary shock as a structural problem, and he’s been positioning his subscribers accordingly – ahead of what he believes will be an eventual rate-cut cycle.
The wildcard in all this is the new Fed Chair, Kevin Warsh. While Warsh has held hawkish views on monetary policy in the past, he has also called for “regime change” at the central bank and, last fall, wrote in a Wall Street Journal op-ed that AI is a “significant disinflationary force.”
Which Warsh shows up to his first FOMC meeting on June 16-17 matters enormously for how this wedge resolves.
Louis has already made his call: transitory wins, the wedge breaks lower, and rate cuts are coming. For the specific companies he’s positioning in ahead of that outcome – and the historical playbook he’s drawing from –
Switching gears, Jonathan Rose just gave his viewers a chance to pocket 140% in two days – here’s how…
While the market wrestles with inflation data and Fed uncertainty, veteran trader Jonathan Rose, editor of Masters in Trading Live, is doing what he does best: finding high-conviction short-term trades and putting his subscribers in position to profit regardless of market direction.
In last , Jonathan highlighted opportunities in Chinese stocks. His logic was straightforward:
China stocks are going to rally into Trump going to China. Trump is going to come out of China with some kind of good news because that’s how these things work…
He’s not going there to come back and say, “I got bad news. Let’s wreck the market.” No, he wants to support the market.
He recommended buying the JD.com Inc. (JD) June 18 $32 calls, paying up to $1.25 per contract.
By Wednesday, JD had ripped more than 8% higher, causing Jonathan’s recommended option to jump to around $3.00.
Anyone who watched the free Masters in Trading Live episode and pulled the trigger turned every $125 risked into roughly $280 in two sessions – a better than 140% return on premium.
And the trade isn’t over…
The calls still have roughly 30 days to expiration. Jonathan says that this gives traders a variety of ways to play it: ride the position longer, take partial profits, or roll up to lock in gains and stay in the game.
This is the kind of setup Jonathan regularly delivers in his free episodes. To be there when he flags the next one for his viewers,
Now, Jonathan’s primary trading edge isn’t chasing what’s hot. It’s following institutional footprints before the crowd arrives – and often selling to the retail crowd when they arrive late.
That’s all the more important today because as Tom Yeung explains below, once speculative trades become too crowded – especially in AI – the risks can rise fast.
The AI trade everyone loves is starting to look dangerous
Tom, lead analyst for our global macro expert Eric Fry in published a piece last week that every investor riding the AI wave should read carefully.
It opens with a story about a Canadian hydrologist – someone with a Ph.D. in Arctic environmental science who has never traded anything in his life. He recently built an AI trading platform in six days using Anthropic’s Claude Code.
The platform scrapes news feeds, Reddit and Twitter, and trades that information across three financial exchanges. It has reportedly worked well.
Now, while Tom applauds the initiative and success, his overall take isn’t positive:
I’m alarmed because I know how these algorithms work.
I’ve built several of them myself, and the success of Eythorsson’s specific approach means we’re entering a manic phase of stock markets where hype and attention matter more than the fundamentals.
Tom cites numbers that back this up.
Semiconductor stocks, as measured by the iShares Semiconductor ETF (SOXX), rose as much as 70% over just six weeks. Shares of Intel Corp. (INTC) now trade at roughly 100 times forward earnings – higher than during the dot-com peak. And one chipmaker that lost $54 million last year is trading at 60 times forward earnings.
Even if you’re in the AI trade and not yet ready to sell, Tom’s take here must be wrestled with:
We’re seeing valuations where it is possible for stocks to lose 50% or more on sentiment alone.
To be clear, Tom and Eric aren’t telling investors to avoid AI entirely – their advice is to avoid the crowded, momentum-driven trade and focus instead on what Eric calls “AI Survivors.”
These are companies producing goods and services that AI cannot replicate or replace, in industries like agriculture, energy, mining and hospitality.
For Eric’s full thinking on where to be positioned – and what to avoid – , where he gives away a handful of specific stocks to sell and buy.
As for Tom, I’ll let him take us out today:
We all know that 1999 and 2021 both ended poorly for speculators. Momentum alone cannot justify sky-high prices, and “silly” prices have a habit of coming back down hard…
When a reckoning comes – and it will – the results will wipe out years of performance…
It’s essential to stay away from stocks with large downside.
Have a good evening,
Jeff Remsburg
